By Sam Mamudi

Don’t think of the commodities swoon as just a correction after years of outsized gains. The party’s over and the decline is just starting, according to Stanley Druckenmiller.

In his Sohn Investment Conference presentation, Druckenmiller said the 2002-2011 gains for commodities were an anomaly and that the declines of the past couple of years are the norm.

Why? China, he said, which embarked on an unprecedented investment program that caused the spike in commodity prices; in one slide, Druckenmiller suggested that 50% of all global demand from 2002 to 2011 came from china.

But now that level of investment has abated, the downside is underway, he said. What’s worse is that commodities producers have ramped up production expecting high demand to continue. Even if they realize their mistake quickly, said Druckenmiller, production lags mean it will take three to five years before they can adjust output. The supply/demand situation for commodities is “deadly” he added.

Among commodities-related ETFs, the PowerShares DB Commodity Index Fund (DBC) was up 0.4% to $26.47, the PowerShares DB Agriculture Fund (DBA) was down 0.3% to $25.98 and the SPDR Gold Trust (GLD) was up 1.4% to $142.28.

Druckenmiller also commented on the U.S. markets, calling the Federal Reserve’s QE policy inappropriate. But he doesn’t see any danger to stocks for as long as the policy continues – and that looks likely to be for a while. Druckenmiller says he sees a markets melting up over the short term.

In terms of specific recommendations, he said Google (GOOG) is his favorite pick and largest holding.

“They’re in the cat-bird seat, being a leader in two of the bigger trends, migration to mobile and big data.”

Projects such as driverless cars and Google Glass show the company is using its big data to grow innovation.

“At 20 times earnings, I can’t imagine a better steal,” he said of Google’s stock value.

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